Social Security is America’s largest government program and arguably the most important as it serves as a lifeline for tens of millions of Americans.
By now, most voters have heard that vital lifelines will be at risk in the years to come. Unfortunately, too many have heard that the country has dealt with this topic before and that we only have to follow the example of the past in order to put the program on a stable footing.
This is a false and dangerous narrative that fuels the complacency that encourages ongoing inaction in Congress.
Like in . explained current trustee reportWithout action by Congress, the Social Security Trust Fund should be able to pay full benefits for about 14 years, or about that Life expectancy from someone who turns 73 today. Unless Congress takes action on the finances of the program, these people will be more vulnerable and dependent on Social Security the moment the dramatic benefit cuts occur.
Remember, this prospect is not a guarantee. It is actually a serious warning about what could happen even in a healthy and growing economy. In response, policy experts and politicians argue with the unimaginable: Congress needs to grow up and work together as it did in 1983.
The analytical comparison of the current situation with that of 1983 presents an incomplete view of the state of social security, which robs the crucial historical and financial context. The 1983 crisis had a different cause and promised minor consequences over a different duration. In addition, in 1983 Congress had a wide range of tools at its disposal to prevent a system from collapsing.
The painful truth is that the comparison is wishful thinking at best and a dumb errand at worst to distract voters from the drastic consequences of further delay.
The same workers who saved social security in 1983 will have to save again in 2021.
Believe it or not, Social Security was a relatively minor economic problem in 1983, despite wistful memories of political leadership and bipartisan efforts. At the time, the program had a small and temporary cash flow gap caused by temporarily adverse economic outcomes was caused; a combination of sluggish wage growth and high inflation created a short-term imbalance in which the program would briefly slip into superficial bankruptcy before returning to the black when the final round of boomers entered the workforce.
In contrast, the current situation threatens great losses that will be driven into eternity, driven by permanent structural forces: the aging of our population and the Decrease in birth rates since the height of the baby boom. These are fundamental challenges that have been compounded by decades of inactivity by Congress. Taken together, the social security administration actuaries expect the red ink to flow deeper and redder – forever.
Another difference between the two periods is that Congress no longer has the means to deal with the imbalances. Four decades ago it was possible to change the system in such a way that the majority of voters were only marginally affected. Current legislation has not changed the planned social security tax rate of 12.4% and has largely retained the retirement age for people aged 30 and over.
The hard truth is that the bipartisan agreement we praise today was little more than an agreement that our children would work more and earn less.
Most of these legal remedies are still in progress. Two changes make up most of the 1983 correction: raising the retirement age by two years and taxing some benefits. Ordinary retirement age will not reach 67 years old until next year, and the savings will likely accrue over the next three decades. Income from taxing benefits is expected to increase 9% per year as more seniors reach a non-inflation-adjusted tax trigger. Taken together, workers now approaching retirement are already facing significant benefit cuts compared to their predecessors.
This 1983 strategy does not provide a solution to today’s problem. In fact, it poses a major obstacle for policy makers looking to consider alternatives.
Keep in mind that any benefit cuts we are considering today will almost certainly have to be applied to the people who took the brunt of the 1983 changes. Hence, the 1983 idea implies that the same workers who saved Social Security in 1983 will have to save it again in 2021.
It cannot be denied that in 1983 Social Security found itself in a crisis position where powerful people had to compromise on their strong political differences. As noble as their actions were, their success gives little meaningful insight into the far greater challenges the program is facing today. It was a different problem in a different time when more gradual change was possible.
The harsh truth for voters who believe that Congress will step in at the last minute and come up with a painless solution is that you are waiting for Godot. Postponing corrective action not only threatens the future of current workers; it also undermines the old-age security of today’s seniors. We are the people over whom so many hands have been ranked.
Brenton Smith writes about social security.